If you own rental property, you probably already know you should have landlord insurance to protect you against damage to the home or liability issues that may crop up on the property (e.g. someone slips and falls). Besides the basic coverage, there are several optional riders you get that will provide additional protection against losses. Here are three you should consider adding to your policy.
Rent Guarantee Insurance
As a landlord, you have monthly costs that must be paid regardless of whether the home is rented or not. So any month when your property sits empty is a month when you're losing money. Rent guarantee insurance (also called tenant default insurance) is a policy that covers the monthly rental amount in the event a tenant stops paying. This can help stem the tide of financial losses until you can find another renter.
Like all insurance policies, there is a deductible that may be equal to one month's rent or you may not start receiving the payments until a month after the tenant defaults. Additionally, some companies require you to thoroughly screen tenants, including conducting credit checks before they'll cover them to help minimize losses.
The cost varies depending on the amount of rent you charge, but it costs about $250 a year for homes that rent for $1,200 or less per month. Depending on your policy, you'll be covered for anywhere from 3 to 12 months worth of lost payments.
Vandalism and Burglary
If your rental property is located in a less than ideal neighborhood where burglaries or criminal mischief frequently occur, you may want to add on coverage for vandalism and burglary. Regular landlord insurance typically only covers the building and other structures sitting on the property when they are damaged by environmental factors, such as fire, lightning, and wind. The insurance may also cover damage to equipment used to maintain the property, such as lawn mowers and tree trimmers.
However, these policies may not cover theft or vandalism, which is why a rider for these items may make financial sense in the long run. The policy will replace covered items that are stolen during a burglary and pay to have the property put right if someone vandalizes it. This can potentially save you thousands of dollars a year if the property is in a high-risk neighborhood.
It's important to note some policies won't pay out if the property has been vacant for a period of time. So it's a good idea to discuss this issue with an insurance agent so you aren't hit with an unpleasant surprise when you go to file a claim.
Construction Coverage
Keeping your home updated is a good way to ensure it remains attractive to potential renters. However, a standard landlord policy may not cover the dwelling when it's unoccupied and under construction. You can avoid having to eat losses that may occur during this phase by adding a rental property under construction rider to your policy. For instance, the policy may cover items that are stolen from the site or damage to the site caused by the builders.
A companion policy to this type is insurance is a building code rider. Building codes, ordinance, and laws change over time. So a home that may have met the require standards when it was built may be in violation of local regulation when it comes time to make repairs or renovate. A building code policy will cover costs associated with make sure your property falls in line with the law during construction, maintenance, demolition, or other stages of renovation and building.
For more information about these or other riders you may want to add to your landlord insurance policy, contact an insurance agency.
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